In the recently enacted Federal Courts Jurisdiction and Venue Clarification Act of 2011 (JVCA), Congress made important revisions to the removal, jurisdiction and venue provisions in Title 28 of the U.S. Code that apply to any action commenced on or after Jan. 6, 2012.1 Several of the most prominent amendments concern the procedures for removal of actions to federal court. Most notably, the amendments resolve a circuit split concerning the timing for removal in multi-defendant lawsuits, and allow some flexibility in removing an action based on diversity jurisdiction when the amount in controversy is not plainly stated in the state court complaint.
The revisions had been under consideration since at least 2006. In enacting the JVCA, Congress was responding to critical commentary from academics and advocacy groups and to the expressed views of judges that the prior rules “force[d] them to waste time determining jurisdictional issues at the expense of adjudicating underlying litigation.”2
Previously, 28 U.S.C. §1446(a) provided that “[a] defendant or defendants” could initiate the removal process by filing a notice of removal, and §1446(b) required that “[t]he notice of removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant…of a copy of the initial pleading.” The reference to “the defendant” in singular form in §1446(b) caused a division among the circuits of the U.S. Court of Appeals as to the timing for removal in cases involving multiple defendants.
The Fourth and Fifth circuits held that the language meant that only one notice of removal could be filed and was required to be filed no later than 30 days after the first defendant was served. Any defendant served after that deadline was denied any chance to seek removal if the action had not been removed within the first 30 days. Several other circuits disagreed, including the Third, Sixth, Eighth, Ninth, and Eleventh circuits. Those courts applied a “last-served” rule under which each defendant was allowed 30 days from the date when it was served to file a notice of removal even if the first 30-day period had elapsed. The Second Circuit had not taken a view, but district courts within the Second Circuit were trending toward the last-served approach.
The JVCA amended 28 U.S.C. §1446(b) to codify the last-served rule. It now provides that each defendant will have 30 days from his or her own date of service to seek removal. The new provision also allows earlier-served defendants to join in or consent to removal by a later-served defendant.
Despite this important clarification, Congress did not revise language governing when a defendant’s 30-day removal period begins to run. As before, the amended §1446(b) provides that the 30-day removal period starts upon “receipt by the defendant” of the initial pleading in the action “through service or otherwise.” Before 1999, some courts had held that the 30-day clock could start running if a defendant had received a complaint informally even if a summons had not been formally served. In Murphy Brothers Inc. v. Michetti Pipe Stringing Inc., however, the U.S. Supreme Court clarified that “a named defendant’s time to remove is triggered by simultaneous service of the summons and complaint, or receipt of the complaint, ‘through service or otherwise,’ after and apart from service of the summons, but not by mere receipt of the complaint unattended by any formal service.”3 Even though §1446(b) still includes the previously confusing “receipt” language, the Murphy Bros. decision should continue to control when the clock starts to run for a defendant to remove.
It is also important to bear in mind that the 30-day period is triggered by a defendant’s receipt of the “initial pleading” and not its receipt of a “complaint.” In New York state practice, an action can be commenced by service of a summons with notice or by service of a summons with a motion for summary judgment in lieu of complaint.4 Considering the question as it applied to an action removed more than 30 days after service of a summons with notice, the Second Circuit concluded that the 30-day period would begin when the “defendant received the first document from which all of the facts giving rise to removability were evident.”5 As a result, if a defendant receives a pleading that “provides the necessary facts to support the removal petition,” then, as before, that defendant should be careful to consider promptly whether removal is appropriate.
New subsection 1446(c) focuses solely on diversity jurisdiction and includes some key changes.6
Before the JVCA, it was uncertain how a defendant should proceed if the state court complaint did not state an amount in controversy or if the amount claimed was below the statutory $75,000 threshold even though state law would allow recovery in excess of the amount demanded. To address these circumstances, the JVCA added §1446(c)(2), under which a defendant can assert an amount in controversy in its notice of removal when the state court pleading seeks non-monetary relief or a money judgment in instances where state practice either does not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded. In those circumstances, removal will be upheld if the district court finds by a preponderance of the evidence that the amount in controversy exceeds the $75,000 threshold.
As before, when an amended complaint creates a basis for removal that did not exist in the initial pleading the defendant has 30 days from receipt of the amended pleading to seek removal. If a defendant lacks sufficient information to remove an action based on diversity jurisdiction within the first 30 days, the defendant can use discovery obtained in the state court action to help determine the amount in controversy. Discovery materials (e.g., an interrogatory response or a document produced) showing that the amount in controversy exceeds $75,000 will be considered an “other paper” that triggers the start of a new 30-day period for removal, again subject to a preponderance of the evidence standard in federal court.
The JVCA also has added a “bad faith” exception to the one-year absolute deadline for removal based on diversity of citizenship. Before the JVCA, the rule in diversity cases was that removal was prohibited more than one year after commencement of the action. Thus, for example, a defendant would not be permitted to remove an action following the dismissal of a plaintiff or another defendant who had been the only impediment to complete diversity of citizenship. The revised statute now authorizes removal after expiration of the one-year outside limitation period if the district court finds that the plaintiff’s actions were aimed at preventing removal.
Other Removal Amendments
The JVCA codifies several other important changes to the federal removal provisions.
‘Unanimity’ Rule Codified. The JVCA codifies the long-standing common law principle that in cases involving multiple defendants, the defendants must unanimously join in or consent to removal sought pursuant to 28 U.S.C. §1441(a). The removal statute now expressly provides that “all defendants who have been properly joined and served must join in or consent to the removal of the action.”7
Remand for Unrelated State Law Claims. If a case is removed based on federal question jurisdiction, 28 U.S.C. §1441(c) now requires the federal district court to sever from the action and to remand to the state court any unrelated state law claims that are raised in the complaint. Some question had been raised as to whether the previous wording of §1441 complied with the Constitution because it permitted federal courts to decide state law claims despite lacking a sufficient nexus to federal subject matter jurisdiction. While unrelated state law claims must now be severed and remanded to state court, the supplemental jurisdiction provided for under 28 U.S.C. §1367 continues to allow federal district courts to assert jurisdiction over state law claims when those claims are “so related to” claims that raise a federal question “that they form part of the same case or controversy.”
Removal of State Criminal Actions Governed by Separate Procedural Statute. Prior to the JVCA, 28 U.S.C. §1446 governed the procedure to remove both civil and criminal actions that had been filed in state court. However, the JVCA created a new procedural section to govern removal of state criminal actions, 28 U.S.C. §1455. As a result, amended §1446 now only governs the procedures for removal of civil actions. The narrow grounds provided for removal of state criminal actions are set forth in separate sections of the removal statute that were not amended.8
Notwithstanding the important changes effected by the JVCA, the general principle that the procedural requirements for removal are to be strictly enforced remains paramount. As always, therefore, lawyers should closely review the revised removal provisions and act promptly whenever it appears that a newly commenced state court action could be subject to removal.
John J. Clarke Jr. is a litigation partner and John Vukelj is a litigation associate in the New York office of DLA Piper.
1. Pub. L. No. 112-63, 125 Stat 758 (Dec. 7, 2011).
2. Report of the House Judiciary Committee, H.R. Rep. No. 112-10, 112th Cong., 2d Sess., at 1-2.
3. 526 U.S. 344, 347-48 (1999).
4. See CPLR 305(b); CPLR 3213.
6. In the short time since enactment of the JVCA, critical commentary has suggested that its changes did not go far enough to address the prior problems in the removal statute. See William Baude, “Clarification Needed: Fixing the Jurisdiction and Venue Clarification Act,” 110 Mich. L. Rev. First Impressions 33 (January 2012) (available online).
7. 28 U.S.C. §1446(b)(2)(A).
8. See 28 U.S.C. §§1442-1444.